Dishonest Business Practices and Schemes (No. 260)
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by People's Law School in June 2017.|
We hope the businesses we deal with have our best interests in mind. Unfortunately, that’s not always the case. Learn about the laws protecting you from dishonest business practices and schemes.
Understand your legal rights
BC law protects consumers against dishonest business practices
BC’s Business Practices and Consumer Protection Act protects consumers against dishonest or misleading business practices.
This law applies to transactions between “consumers” and “suppliers”
A consumer is a person who buys or leases something for personal, family or household purposes.
A “supplier” is a person who in the course of business participates in a consumer transaction. Participating includes advertising or promoting a consumer transaction. This definition covers businesses from your local retailer to the national big box store, but not your neighbour who has a garage sale once a year.
This law applies to sales, transactions or advertisements involving goods, real estate, services or credit, but it doesn’t cover securities or insurance.
“Deceptive acts or practices” are prohibited
Under BC law, a supplier must not engage in a “deceptive act or practice”. This includes any oral or written statements, visual or descriptive representations, or conduct by a supplier that can deceive or mislead a consumer.
For example, it’s deceptive for someone selling roofing products to say your house needs a new roof when it doesn’t. It’s deceptive for a car dealership to tell you a car you’re interested in was previously owned by a senior citizen when, in fact, it used to be a taxi.
“Unconscionable acts or practices” are prohibited
“Unconscionable acts or practices” are also prohibited. Unconscionable includes unscrupulous or dishonest practices such as high-pressure sales tactics. For example, was a lot of undue pressure put on you to persuade you to enter into the consumer transaction? Were you taken advantage of because of your age or inability to understand the nature of the deal? Was the price much more than the price for similar products sold elsewhere?
If a business does something deceptive or unconscionable
If a business does something deceptive or unconscionable, you have options.
Complaining to Consumer Protection BC
You can complain to Consumer Protection BC. They investigate situations where a supplier may have done something deceptive or knowingly took advantage of you. They can issue a “compliance order” forcing a supplier to comply with the law and possibly reimburse any money that consumers have lost.
In extreme (and rare) cases involving many consumers who have lost a lot of money, Consumer Protection BC can freeze the supplier’s bank account and sue the supplier. In serious cases, the supplier can also be charged with an offence under the law and fined.
Suing the supplier
You can bring a legal action against the supplier. You can use Small Claims Court if your claim is for less than $35,000. If your claim is for less than $5,000, you can bring your claim to the Civil Resolution Tribunal.
If your action goes to trial and you win, the court can order compensation for your financial loss. The court can also award “punitive damages”, which are designed to punish the supplier.
Federal law prohibits false or misleading advertising
There are also federal laws that prohibit sellers from advertising or saying anything that is false or misleading.
One example is “bait and switch” tactics. They are against the law. In general, if a business advertises a sale, it must stock sufficient items at the bargain price or give you a rain check, rather than try to get you to buy a different, more expensive item.
Also, if there’s more than one price tag on an item, the store must charge you the lowest price, unless the lower price has been crossed out or covered up.
Deceptive telemarketing is prohibited
Some companies use deceptive practices when trying to sell you something over the phone. They call saying you’ve won a prize, and all you have to do is pay for the shipping and handling fees or give your credit card number for verification purposes. Or they offer to sell you something that sounds like a really good deal, but you end up with a cheap plastic watch instead of the expensive watch you expected. This is deceptive telemarketing. Deceptive telemarketing is prohibited by the Competition Act and is a criminal offence.
Telemarketers must follow certain rules
BC’s Telemarketer Licensing Regulation applies to telemarketers operating in BC who contact consumers to buy something over the phone. This regulation also applies to third-party fundraisers. The regulation helps protect consumers by licensing and regulating telemarketers, and imposing penalties for violations of the regulation. For example, a licensed telemarketer may contact you only on weekdays between 9 am and 9:30 pm and weekends between 10 am and 6 pm, and they can’t communicate with you on statutory holidays.
If you’re getting fed up with telemarketers
If you get an unsolicited phone call to buy something, don’t give out information about your bank account or credit card, and don’t be afraid to hang up. Telemarketers who phone you offering prizes or products for sale must tell you who they work for. To reduce the number of unsolicited calls, register your phone number with the National Do Not Call List.
Federal law protects against spam and online threats
Canada has a law that aims to protect people from spam (junk email and text messages) and online threats (spyware, malware, phishing scams, and so on). Unfortunately, the law cannot control businesses and people outside Canada, and they produce huge amounts of spam and online threats.
Consent is required
A key section of Canada’s anti-spam law requires senders of commercial emails and text messages to have the consent of the person they’re sending the message to (the recipient). The law also prohibits installation of computer programs and collection of electronic addresses without consent, as well as false and misleading representations.
There are two types of consent
There is implied consent if there is already a relationship between the sender and recipient of a commercial message. It lasts for two years. Recipients can cancel implied consent any time. Senders of commercial messages can ask recipients for express consent (the recipient agrees to receive messages) to send commercial messages. It does not expire.
Senders of commercial messages must keep records to show they obtained the recipient’s consent. The Canadian government’s anti-spam website further explains implied and express consent.
Senders must identify themselves and let recipients unsubscribe
In addition to getting consent from recipients, senders of commercial messages must identify themselves and include an unsubscribe option in the message so recipients can stop receiving messages.
For more information on the law, see the Canadian government’s anti-spam website, fightspam.gc.ca.
Are pyramid schemes legal?
No. With a pyramid scheme, you’re typically promised that by participating, you can make money by recruiting other people to participate. If those new participants recruit others, everyone up the pyramid will get a share of the new recruitment fees. In other words, pyramid schemes make money by recruiting people rather than by selling a legitimate product or providing a service. In Canada, it’s a crime to promote a pyramid scheme or even to participate in one.
By contrast, multi-level marketing is legal
Pyramid schemes can look a lot like "multi-level marketing", which is legal in Canada. Under "multi-level marketing", people sell consumer goods — such as cosmetics, jewelry or cleaning products — usually in customers' homes. The products are supplied by a multi-level marketing company. While a pyramid scheme focuses on recruiting more people, multi-level marketing focuses on selling products or services.
Promoters asking you to get involved in a multi-level marketing scheme are not allowed to make exaggerated claims. Any claims made about expected earnings must be fair and reasonable and include the average compensation earned by the typical distributor in that business, and the time and effort needed to reach specific levels of income.
If you’re a victim of a pyramid scheme
Contact the Competition Bureau. The toll-free phone number is 1-800-348-5358. A person convicted of promoting a pyramid scheme can be sentenced to a fine or up to five years in jail, or both.
How can I protect against dishonest franchises?
A franchise involves the franchisor granting the franchisee the right to use a particular system of carrying on business or the right to sell a certain product or service. In return, the franchisee typically pays a fee and ongoing royalties to the franchisor.
Be cautious of franchises that consist of selling a product through automatic vending machines or on display racks. You may be promised lucrative high-volume locations and told that all you have to do is keep the machines or racks stocked — and collect the money. But, in fact, the locations are often poor and the sales figures only a small fraction of those promised. After paying thousands of dollars, you may be stuck with some greatly overpriced vending machines and unsellable products.
A well-researched franchise may be an effective business. But if you are considering buying a franchise, it’s wise to have a properly prepared franchise agreement. A lawyer can help with that.
How can I protect against other types of scams?
Work-at-home schemes urge you to send away money to learn how you can make good money working from your home. But these schemes are misleading.
Chain letters inviting you to send and receive money are illegal under the Criminal Code.
Watch out for scams involving the sale of office supplies, listings in directories, and phony invoices. In the office supply scam, for example, a business gets an unsolicited call implying the business previously agreed to accept shipment of paper and office supplies, when in fact the business hadn’t ordered the supplies. When the supplies arrive, they cost way more than the going rate and are inferior.
Agencies that can help
Consumer Protection BC provides assistance relating to certain types of consumer problems and contracts in BC.
- Toll-free: 1-888-564-9963
- Web: consumerprotectionbc.ca
The Better Business Bureau assists people in finding businesses they can trust.
- Telephone: 604-682-2711 for Mainland BC and 250-386-6348 for Vancouver Island
- Web: bbb.org/ca/bc
For inquiries on the Competition Act, call the Competition Bureau.
- Toll-free: 1-800-348-5358
- Web: competitionbureau.gc.ca
For inquiries relating specifically to dishonest selling practices with vehicles, contact the Vehicle Sales Authority of BC. They have information on consumer complaints and on advertising rules for motor vehicle dealers.
- Toll-free: 1-877-294-9889
- Web: mvsabc.com
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